The best part of free is that, well, it's free. The problem with free is that it's rarely actually, honestly free. Facebook (NASDAQ:FB) is free, Twitter is free, Google is free, and Pinterest is free. Until last Thursday, Pinterest was the standout service offering a really free interaction. Then CEO Ben Silbermann dropped a blog post explaining that Pinterest is going to be moving into the world of advertising and promotion. Oddly, people don't seem too upset.
Taking the high road
One of the reasons that folks aren't especially upset probably comes down to the message that Silbermann tried to get across. In his post, he highlighted four points that were going to be wrapped up in the new advertising push, promoted pins. Promotions would be "[t]asteful," "[t]ransparent," "[r]elevant," and evolving.
Both in comments on the post and in reactions in the media, users seemed to take the news pretty well. The clarity of the messaging makes it easy to like what Silbermann is saying, but it also makes it easy to overlook that the plan is essentially what every other online service does.
Look at Google. It also doesn't do big banner ads in its promotions, it simply moves some results to the top in a little box -- tasteful. It puts a tag on that box, indicating that the contents of the box are ads -- transparent. The last two -- relevant and evolving -- are simply how ads on the Internet are supposed to work. No on in their right mind would support a system that had worthless ads that never changed.
As spelled out in the blog post, the reason behind the advertising is to make sure that the company continues to be around. That's code for "we need some money." Advertising on a popular social site is a good way to make some money, as Facebook has shown.
Last quarter, Facebook made $1.8 billion in revenue and $333 million in income. That was largely ad generated, with Facebook surpassing 1 million advertisers on the site. The growth has been phenomenal, and after a horrible introduction to the markets, Facebook is up 73% year to date. A lot of that success has come from Facebook's work on mobile advertising, and revenue from mobile accounted for 41% of total advertising revenue in the second quarter.
Facebook is orders of magnitude bigger than Pinterest. Where Facebook has over 1.15 billion monthly active users, Pinterest has somewhere closer to 70 million. By almost any measure, that's a small user base, but there's still money to be had and growth to be found. Mobile is becoming a bigger portion of Pinterest's user base, and Facebook's success should help the brand find its way in the new medium.
Pinterest's strongest marketing point may be the transparent connections it makes between brands and users. There's no trickery to it -- users just follow brands because they make nice-looking things. Nordstrom has over 4.4 million followers based on nothing more than collections of images of things that the company sells. That's a rich advertising seam just waiting to be mined.
The move looks smart, but we're still a long way off from Pinterest being a public concern. This is a small step on the path to that goal -- if it is a goal -- and it will be interesting to see what the site looks like a year from now.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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